GAB Decision 364
December 7, 1982 Philadelphia Department of Public Health; Docket No.
82-108 Garrett, Donald; Settle, Norval Teitz, Alexander
The Philadelphia Department of Public Health (appellant) appealed a
$69,768 disallowance, by the Public Health Service (PHS or respondent),
of abatement costs under a Childhood Lead-Based Paint Poisoning
Prevention Program (program) grant. The issue in this case was whether
the appellant met all the conditions necessary to charge the costs of
certain abatement services to the grant.
For reasons stated below, we conclude that the abatement services
were incorrectly charged to the grant. We also conclude that the
respondent used an inaccurate formula to calculate the disallowance.
Therefore, we uphold the respondent's disallowance subject to the
appellant's presenting documentation of actual costs incurred in
providing the abatement services. In addition, the appellant may
present documentation to show that part of the costs disallowed were
proper during the period the 1979 regulation was in effect.
I. Background
A. Laws and Regulations
In 1971 Congress enacted the Lead-Based Poisoning Prevention Act
(Pub. L. 91-695) to help local governments control lead-based paint
poisoning among children and move toward elimination of such poisoning.
Under section 101(c)(3) of the Act a local program was to include
"development and carrying out of intensive follow up programs to insure
that identified cases of lead-based paint poisionings are protected
against further exposure to lead-based paints in their living
environment." The history of the legislation stressed that it was
useless to have children with lead paint posioning be given medical
treatment if they were to continue to live in the same conditions which
caused the poisoning in the first place.
The implementing regulation on abatement was 42 CFR 91.8(a)(2)
(1972). This provided that funding for abatement, or "deleading",
of
residential dwellings was available only where the grantee:
finds that the presence of lead-based paint on interior surfaces of
such a dwelling presents an imminent danger to the health and safety of
one or (2) more residents and . . . finds, and demonstrates to the
satisfaction of the Secretary, either before or after such deleading,
that no other funds are reasonably available for such deleading.
In addition, in 1975 the Center for Disease Control of PHS issued
"Guidelines for Grant Applications-Childhood Lead Poisoning Control."
These tracked the 1972 regulations on abatements, and in addition
provided that "no more than 10 percent of the direct costs of any grant
award" were to be used for "emergency hazard reduction of dwelling
units."
In 1976 the Act as amended to provide funding for follow-up programs
to eliminate lead-based paint hazards in residential dwelling units or
houses, including specifically programs to provide:
financial assistance to the owners of such units or houses who are
financially unable to eliminate such hazards from their units or houses.
In administering programs for the elimination of such hazards, priority
shall be given to the elimination of such hazards in residential
dwelling units or houses in which reside children with diagnosed
lead-based paint poisoning.
Pub. L. 94-317, section 204(a)
In March 1979, which was after most of the period covered by this
audit, the regulation was amended (42 CFR 91.9(b)(2)) to provide that
grant funds could be used for elimination of a lead-based paint hazard
in a residential dwelling unit "only under one of the following
conditions":
(i) When the grantee finds and demonstrates to the satisfaction of
the Secretary that an owner-occupant of a dwelling which houses a child
with diagnosed lead poisoning is financially unable to eliminate the
hazard and that no other funds are reasonably available for the
reduction of the hazard.
(ii) When the grantee finds that a hazard at a residential dwelling
unit presents an imminent danger to at least one child with undue lead
absorption.
B. History of the Case
Appellant was the grantee of awards for teh lead paint poisoning
control project for the City of Philadelphia from June 1, 1972 through
October 31, 1979. At the federal level responsiblity for administration
of the program was shared by the Center for Disease Control (CDC) (3)
and the Office of the Regional Health Administrator. The Philadelphia
Regional Office of the Department of Health and Human Services (HHS)
conducted an audit of appellant's administration of the program for the
period from November 1976 through October 1979. (Audit Control No.
03-10354)
The auditors found that only six abatements were emergency ones which
met both of the requirements for charging them to the grant under the
1972 regulation, namely, imminent danger and no other funds reasonably
available.
The respondent adopted the auditors' findings and disallowed the
costs of all abatements which had been charged to the grants except the
six emergency ones. Appellant then requested a review by the Public
Health Service Center for Disease Control Grant Appeals Board (PHS-CDC
Board).
1. The PHS-CDC Board Decision
The appellant made two submissions, dated January 7, 1982 and April
1, 1982, to the PHS-CDC Board, in support of its request for the
reversal of the disallowance. In the submissions to the PHS-CDC Board,
the appellant argued that: (1) certain employees were specifically
hired to eliminate lead hazards, and it would have been unrealistic to
remove those employees from the payroll after completion of each
emergency abatement, until the next emergency abatement occurred; (2)
while the majority of the abatements were not classified as "emergency"
types, they all qualified under the section of the regulation which
allowed for abatements when there existed an "imminent danger to the
health and safety of one or more residents"; (3) the project did not
charge any of the costs of the abatements identified as "non-emergency
type abatements" to the HHS funds; (4) the amount charged for
abatements did not exceed 10 percent of the total grant award; (5) the
rules and regulations were being retroactively applied; and, finally,
(6) the auditors misunderstood the abatement aspects of the program.
The appellant also stated that the auditors calculated the costs of the
six abatements found to be allowable using an incorrect formula. The
appellant explained that this formula was created for the Model Cities
Agency but was never used by the appellant to charge the PHS grant.
By letter dated May 19, 1982, the respondent notified the appellant
that the PHS-CDC Board had denied its appeal. The PHS-CDC Board found
that the program regulations, 42 CFR 91.8(a)(2)(1972) and 42 CFR 91.9(
b)(2)(i)(1979), reflcted the need to attempt to collect the costs
incurred in performing abatements from the building owners. Further,
the PHS-CDC Board ruled that the appellant's arguments had no merit,
citing the appellant's own statement that the only difference between
the allowed abatement costs and the disallowed costs was the inability
of the owner to pay for the allowed abatements. The PHS-CDC Board, in
ruling that the auditors applied the appropriate standard in determining
charges (4) to the grant for the performance of abatement hazards,
stated that the issue was whether there was evidence to satisfy the
condition that there was no other source of payment for the abatement
before it could be charged to the grant.
II. Discussion
A. The Appellant's Position
The appellant's position has remained basically the same throughout
the entire appeals procedures. The appellant argued, in addition to the
arguments made to the PHS-CDC Board, that the respondent never
established guidelines or defined "financially unable" property owners,
and that the guidelines received on November 6, 1975, which allowed for
up to 10 percent of the grant award to be used for emergency hazard
reduction, were the only document available to the project at the time
of the audit. Further, the appellant stated that documentation for all
abatements performed by city personnel was persent in case records or
other official records as to the income levels of property owners and
their inability to pay. The appellant stated that CDC personnel never
requested or looked for this type of information even though it was
readily available for their review.
B. Analysis
1. The 1972 regulation requires that for abatements to be charged to
the grant no other funds be reasonably available.
The appellant stated that the guidelines received on November 6, 1975
were the only guidance available to the project at the time of the
audit. However, the appellant did not comment on 42 CFR 91.8(a)(2)(
1972), cited by the respondent and the PHS-CDC Board. That regulation
conditions availability of grants funds as follows:
Deleading of residential dwellings, only where the applicant finds
that the presence of lead-based paint on interior surface of such a
dwelling presents an imminent danger to the health and safety of one or
more residents and where the applicant finds, and demonstrates to the
satisfaction of the Secretary, either before or after such deleading,
that no other funds are reasonably available for such deleading.
(emphasis added)
The appellant argued that the 1979 regulation was being applied
retroactively. The PHS-CDC Board did not state that the 1979 regulation
was being applied here, but that it, as well as the 1972 regulation,
"reflected" the need to make attempts to collect costs of abatements
from the owners.
(5) The 1972 regulation was clearly effective during most, if not
all, of the audit period. Furthermore, the regulatory language is
essentially the same as the applicable statutory language.
The conditions of the grant award state that the appellant is "bound
by the specific terms and conditions set forth in the laws, regulations,
policies and guidelines under which the grant is authorized."
(respondent's appeal file, tab no. 1) (emphasis added) We are not
applying the 1979 regulation in this case, but the 1972 regulation which
provides that the standard to be applied is a showing that no other
funds for deleading were reasonably available.
Moreover, the appellant has acknowledged that the respondent's
guidelines were available to it during this time period. The guidelines
themselves also contain the relevant language, stating, in pertinent
part:
where. . . the presence of lead-based paint. . . presents an imminent
danger to the health and safety of one or more residents. . . and (the
applicant) demonstrates. . . that no other funds are reasonably
available. . . (Respondent's appeal file, tab. no. 9)
The appellant claimed it was predjudiced by retroactive application
of the 1979 regulation, but the later regulation could actually favor
appellant under some circumstances. It is, as distinguished from the
1972 regulation, in the alternative, allowing funding for abatements
under "one of the following conditions." The first condition requires
that an owner-occupant of a dwelling where there is a child with
diagnosed lead poisoning is financially unable to eliminate the hazard
and no other funds are reasonably available. The second condition is
where a hazard at a residence presents an imminent danger to at least
one child with undue lead absorption; no financial requirement is
given. Accordingly the appellant should be allowed to show if any of
the disallowed costs of abatement performed between March 5, 1979, the
effective date of the regulation, and the end of the audit period met
the second condition.
The appellant argued that no more than 10 percent of the total grant
award was used for abatement sevices, and that all of the abatements
qualified under the "imminent danger to health and safety" standard.
The respondent argued that the 10 percent limit applied only to the
amount of funds that could be used for emergency hazard abatement and
did not release the appellant from the other conditions. We agree with
the respondent for two reasons. First, there is nothing in the
regulation or guidelines which allows for more than 10 percent of the
grant award to be used for abatements under any circumstances. Second,
the appellant (6) has pointed to nothing in the regulation or the
guidelines which would indicate an exemption from the other conditions
solely on the basis of not expending more than the limited 10 percent.
2. The burden of proving owner inability to pay is properly on the
appellant.
Appellant argued that documentation was available for all abatements,
which showed the inability of property owners to pay. This information,
according to appellant, was available in case records or official
records, and CDC personnel never requested or looked for this type of
information.
The 1972 regulation clearly required more than having the information
available. The grantee was required to "demonstrate to the satisfaction
of the Secretary" that no other funds were reasonably available for the
deleading. If the information was available, the appellant had to
produce it.
3. It is within the conditions of the grant award to require the
appellant to charge the emergency abatements covered by the grant only
with the costs of those abatements.
The appellant has argued, in a number of submissions, that no direct
abatement costs were ever charged specifically as part of the grant.
The appellant stated that the costs of abatements under the PHS grant
have always been the cost of personnel on payroll plus any expenditures
for supplies and equipment because these costs have always been approved
as line items under the grant. The Board has adhered, in previous
decisions, to the general principle in grant law that costs must be
allocable to a grant before the costs can be charged to it. (Pinellas
Opportunity Council, Inc., Decision 80, February 6, 1980; Indiana
Department of Public Welfare, Decision No. 150, February 24, 1981) That
general principle is applicable to this case. The approval of a line
item, such as personnel, in a grant budget does not mean that all costs
may be charged to that item simply because they are the type of cost
approved.
The appellant did not deny that the personnel hired to do PHS
abatements were also available to do non-PHS abatements, nor has the
appellant denied that supplies and equipment, purchased in large
quantities, were also used for non-PHS abatements. The appellant stated
that there were no guidelines on the use of non-PHS supplies and
equipment. The appellant has not pointed to any rule or regulation
which would allow personnel and supplies and equipment used for non-PHS
abatements to be charged to the PHS grant, even if the abatements
otherwise met all grant requirements. (7) 4. Some of the appellant's
costs should be chargeable to the PHS grant.
We think that the respondent has taken a position that is too strict
regarding what costs may be charged to the grant as abatement costs.
Although we agree with the respondent that the abatement costs should be
charged to the grant on a per unit basis, to ensure that only abatements
meeting PHS grant conditions are being paid for, we do not agree that
only the costs of personnel at the abatement site, plus supplies and
equipment, may be charged to the grant.
The appellant is correct in one of its contentions. The appellant
stated that the auditors used an unrealistic formula to calculate the
costs of the PHS abatements. These were based on unit costs prepared
for the Model Cities program and never intended for use in the lead
paint poisoning prevention program. The auditors' position, which was
adopted by the respondent, was that only costs of personnel for time
spent at the abatement site, and supplies and equipment, could be
charged to the grant. The appellant should be provided the opportunity
to show the actual costs of the PHS abatements. Further, the appellant
should be allowed to include, as part of the personnel costs, reasonable
preparation time for the abatements and transportation to and from the
abatement sites. These costs should be consistent with costs charged
for non-PHS abatements.
III. Conclusion
Based on the foregoing reasons, the disallowance of $69,768 is
sustained. The appellant, however, is provided 30 days to produce
documentation of actual costs incurred in providing abatement services
consistent with non-PHS abatement cost,and the respondent should review
and evaluate such documentation. Appellant may also produce within the
30 days documentation to show that any abatements after March 5, 1979
met the requirements of the 1979 regulation. If the parties are unable
to agree on what reduction in the disallowance, if any, should result
from such documentation, the appellant may then appeal such dispute to
this Board.
OCTOBER 22, 1983